An economic boom in Vietnam turns it into “new Thailand” in the eyes of investors

In light of the global economic changes and the intensification of competition between developing countries in Southeast Asia, Vietnam has emerged as a remarkable destination for foreign investors until some described it as “the new Thailand”, especially after the booms in the tourism and industry sectors.

If we go back a little, specifically until 2015, Thailand was at the height of its economic power, driven by a great prosperity in the export sector, as it achieved a trade surplus of $ 28 billion.

In the following year, this surplus rose to 43 billion dollars, and continued to maintain this strong performance thanks to its agricultural and industrial exports, in addition to its services until the “Corona” pandemic came to fluctuate the equation, as the pandemic revealed the fragility of the export reliable economies, such as the Thai economy, which was directly affected by external shocks such as commercial wars and epidemics, which led to the disturbance of travel and trade patterns. Despite the start of recovery, Thailand is still facing difficulties in restoring its previous trade momentum, as its trade surplus in 2024 amounted to about $ 11 billion, a number that is not bad in the general context, but it represents a sharp decline in the usual level of Thailand.

Economic shift

This decline reflects a major challenge to the countries based on external demand in a world characterized by high geopolitical tensions and poor global growth.

On the other hand, a neighboring country, which is Vietnam, is witnessing an amazing economic shift based on the same economic model that Thailand followed: (manufacturing for export).

In 2015, Vietnam was suffering from a billion dollar trade deficit, and its exports amounted to 181 billion dollars, less than 94 billion dollars from Thailand’s exports at that time, but the following years witnessed a fundamental change. In 2023, Vietnam exports exceeded the barrier of $ 400 billion, outperforming Thailand, whose exports amounted to about 345 billion dollars only. In 2024, Vietnam recorded a trade surplus of $ 28 billion, which reflects stable economic growth despite global economic challenges.

Tourism

This mutation was not limited to the industrial side only, but also extended to the tourism sector, despite the continuation of Thailand in the lead in the regional tourism scene, the number of tourists coming to it is still without levels before the pandemic, but it is estimated that it may record a decline in the number of visitors this year compared to the previous year. In contrast, Vietnam is preparing to break new records in the number of arrivals, driven by improving the quality of services and the development of infrastructure as a result of its economic growth.

However, the achievement of a trade surplus in itself should not be considered as conclusive evidence of a comprehensive economic superiority. The most important is to understand the reason behind the achievement of this surplus or deficit.

Given the similarity of the two economic models in both Thailand and Vietnam, which is based on (manufacturing for export), the comparison between the two countries may reveal deep visions on the success of this model under the changing conditions globally.

The cost of production

Vietnam’s superiority in recent years is attributed to a decrease in the cost of production in it, as the individual’s GDP level in Thailand is higher than his counterpart in Vietnam, which means that the cost of production inputs such as wages and energy is relatively higher in Thailand. This cost difference gives Vietnam a clear competitive advantage, and attracts foreign investors.

This preference is particularly evident when studying the composition of the exports of each country. In 2015, Vietnam exports were distributed between electronics, fabric, and agricultural products, while in 2023 it turned significantly towards high -value products such as smartphones, integrated circuits, and computers, and thus the percentage of textile and agriculture exports decreased from 38% to 28% during that period, while exports increased Electronics remarkably to $ 165 billion, representing 41% of the country’s total exports.

In comparison, Thailand’s exports of electronic products did not exceed $ 48 billion in the same year.

Strategic location

Vietnam benefits from its strategic geographical location near the major markets, such as China and South Korea, as giant companies such as “Samsung”, “LG” and “Xiaomi” pumped billions of dollars in the construction of factories inside Vietnam to be a base of export to global markets and this was reflected even on the tourism sector, as half of the tourists who visited Vietnam in 2024 (out of 17.5 million) They came from China and South Korea, which strengthens the commercial and tourist relationship with Asian neighbors.

As for Thailand, its exports are more diverse, including agriculture, tourism, electronics, chemicals, and machinery. Although this diversity gives the economy a more spacious and stable base, it also makes it more vulnerable to global demand fluctuations.

In addition, the state of political instability in Thailand, which is repeated changes at the level of the country’s leadership, may negatively affect the confidence of investors.

Ultimately, the two experiences (Thai and Vietnamese) offer two important models of emerging economies that depend on export. While Thailand faces challenges in restoring its power, Vietnam continues its rise steadily, gradually turning into a rising star in the global economy. James Gilde * Assistant Professor at the University of Indonesia for “Diplomats”

---

Maintaining growth

Vietnam seems to have managed to transform its economy quickly and effectively from a traditional economy based on agriculture and fabric into a more modern economy that focuses on technology and advanced industries. Several factors have contributed to this transformation, including low manufacturing costs, distinguished geographical location, stable policies, and gradually advanced infrastructure.

But the most important question remains: Will Vietnam be able to maintain this strong growth in the long term in the light of a global economic environment characterized by instability and constantly changing global trade balances?

• Vietnam has witnessed an amazing growth dependent on the same economic model that Thailand (manufacturing for export) has followed, but the results are different.

• Vietnam is partly attributed to the decline in the cost of production in it, and its proximity to major markets such as China and South Korea.